Warriors plan to skip out on their Oakland arena debt, lease-schmease

Leaving aside what went terribly wrong with this Bloomberg News headline, there’s some actual news here about the Golden State Warriors owners’ plans to decamp Oakland’s Oracle Arena in 2018. As you may recall, the Warriors still owe $62 million on outstanding debt for the Oakland arena’s reconstruction in 1996, a debt that their lease says they can get out of if the arena ceases operations. Apparently, though, the team’s owners think they can just walk away from it regardless:

“We have every intention to completely fulfill our obligations in the agreement with the JPA and live up to the terms of the contract that were negotiated between the two parties,” Raymond Ridder, a team spokesman, said in a statement, referring to the joint powers authority. The team says it’s only obligated to pay debt service until the lease expires.

The arena’s county owners beg to differ, and according to the Oakland Tribune, “The lease states that if the Warriors leave before June 30, 2027, the team has to pay any debt service that is not covered by the arena’s net operating revenue as long as the arena remains open for business.” The Tribune further reports that the unpaid debt issue is likely to come up during negotiations for a lease extension to allow the Warriors to play in Oakland for the 2017-18 season until its new arena is ready; I really really hope that county officials have the gumption to say, “Pay us what you owe us, or we’ll see you in court. Enjoy your season in the Bill Graham Auditorium.”


5 comments on “Warriors plan to skip out on their Oakland arena debt, lease-schmease

  1. A Neil- there is another arena 30 minutes away and where the W’s played in 96-97. Oakland doesn’t have a lot of leverage here- once again they signed a horrible lease-

  2. And there’s the Cow Palace too — I don’t actually expect the Warriors to play at the Civic Center.

    From several accounts, though, the lease says that the Warriors need to pay the outstanding debt so long as the arena is still in use, so I don’t quite get what makes them think that that won’t survive the expiration of the lease. Unless this is like the supermarket near my house growing up that had a large “Open 24 Hours” sign in the window, and when I went by one night and the store was closing and I pointed to the sign, the manager looked at me in confusion and said, “It’s not lit!”

  3. I’m not an attorney but from what I read the lease requires them to pay if they terminate which they won’t do. They will let it expire in 2017 and just not exercise their next 5-year option. Even the JPA seems to be saying they hope the W’s do the right thing–

  4. SJA’s nailed it. The Warriors owe the remaining debt IF they terminate their lease before 2027. They won’t do that, as the lease is set to expire in 2017. They just won’t renew. And as was pointed out by Neil and others Oakland’s only leverage is the one year extension the Warriors will need to bridge the gap until the SF arena is ready. But even that is undercut by the presence of the Cow Palace and SAP Arena in San Jose.

    Oakland signed a terrible lease, which given their track record is not at all surprising. Words matter in contracts, they used the wrong ones.

  5. Without having the lease in front of us, it’s impossible to know what the actual terms relating to the renovation debt are.

    The fact that their present lease expires in 2017 may not get them off the hook for the remaining debt. It is not uncommon in “single use” buildings built or heavily renovated for a given tenant to have a series of multiyear leases involved. The tenant and landlord can each have an opportunity to renegotiate rates and other terms, but the tenant may not be free to walk away on any of these expiry dates. In other words, the contract may require them to renew up until the debt is retired in 2027.

    I’m not saying that is the case here, just that not all expired leases allow the holder to simply walk away (think car leases, for example… you don’t get to hand back a 2yr old car with 150,000 miles on it, bald tires, no working headlights and a missing windshield without paying for those deficiencies.)

    As ever, the truth is probably somewhere in the grey area in between what the city and team are saying…

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